The number of electronic and check transactions taking place will reach record levels, surpassing 100 billion by the end of 2009, according to new information from Moebs Services, an economic research firm.
Both consumer and business spending practices were studied in Moebs' research, which found that credit cards, debit cards, checks and automatic payments are being used more often than ever before.
Of the more than 100 billion transactions, debit cards are expected to comprise 33 percent of the total, while credit cards and checks will each likely be used less than 25 percent. Though automatic payments are expected to represent only 20 percent of the total number of purchases, forecasters predict their popularity will increase in the coming years. An automatic payment is a routine authorized withdrawal from a savings or checking account to pay bills.
"Based on current transactions, our projections show that debit cards and automatic payments are taking over at an increasingly rapid rate from the traditional checking account for most Americans," said Mike Moebs, CEO of Moebs Services, in a press release.
Although the number of transactions is increasing, total spending is still declining as it has been since 2008. Consumers are making purchases more often, yet spending less.
"This research indicates that consumers are doing significantly more transactions for significantly fewer dollars than in the past," said Moebs in a press release. "This may be due to easy electronic payment methods replacing cash."
With the increase in debit transactions, Moebs outlines four possible implications facing consumers and their financial institutions:
1. Financial institutions will reap less revenue from overdraft fees as consumers move away from paper checks and opt out of overdrafts.
2. Improved online security will be necessary to prevent fraud as consumers rely more on electronic payments.
3. As the volume of electronic payments increases, there will be a need for quicker and more transparent ways for consumers to manage their accounts and to prevent possible errors.
4. Technology will have to processing all transactions in real time to improve efficiency and to reduce costs.
"Our research suggests banks, credit unions, brokerage and investment houses should accelerate their planning for electronic payment use because we believe there will be implications to the bottom line of financial institutions in pricing, fee structure and service delivery," concluded the press release.